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Striving to stay competitive, Staples opens ‘omnichannel’ stores

August 30, 2013 01:26 PM

Plenty of retail chains are closing stores as they lose market share to online retailers. But office supplies chain Staples Inc., No. 2 in the Internet Retailer Top 500 Guide, has a special problem: E-mail and the digitization of information is shrinking demand for core products like pens and paper. In fact, retail sales of office supplies in 2012 were 1.7% lower in absolute dollars than in 2003, and nearly 25% lower when accounting for inflation. The recent merger of two major competitors, Office Depot Inc. and OfficeMax Inc., only increases the pressure on Staples’ management to come up with ways to stay competitive.

One way it is doing that is by opening in June the first two of what the chain is calling “omnichannel stores.” Those stores cut the retail chain’s largest store formats—which are about 24,000 square feet—in half, while using web-connected kiosks and tablets to provide access to many products not on the stores’ shelves. The retailer aims to have 45 omnichannel stores in place by the end of the year via a combination of renegotiating its leases and moving to smaller locations.

Analysts give Staples credit for recognizing that stores need to shrink. “There is clearly too much retail square footage in the market considering the lack of growth in bricks and mortar in general,” says Jim Okamura, managing director of Chicago-based retail consulting firm Okamura Consulting. “Retailers can either fight or embrace the shift in channel spend.” Staples, he says, is attempting to do the latter.

Because testing is crucial to all of Staples’ endeavors, CEO Ron Sargent and other Staples executives regularly assert that the retailer’s revamp is a work in progress. It will keep what works and abandon what doesn’t. That’s particularly true when they talk about its omnichannel stores, one of which is located in a nondescript strip mall in Norwood, Ma, about 24 miles southeast of Boston.

The store, at first glance, doesn’t appear markedly different from any other Staples stores. But subtle changes throughout demonstrate how the office supplies retailer is seeking to use the web to change the way shoppers use its stores.

When a shopper walks in, he sees a monitor overhead that highlights the retailer’s buy online, pickup in-store program—it even features on the screen the names of shoppers whose items are ready for pickup—and directs shoppers to the counter where those items can be picked up. The program guarantees that items will be ready within two hours. “We’ll see whether having the name on the screen makes a difference,” says Mike DeSanto, senior vice president, sales and operations.

Dotted throughout the store are six large kiosks, essentially large tablet computers—some of which let consumers buy from the retailer’s tablet-optimized site, while others offer product information, such as an ink and toner finder that can identify the item a shopper needs based on his past Staples purchases. Each kiosk features a credit card reader so shoppers can complete purchases without having to interact with a cashier.

The kiosks, along with tablets that a handful of associates carry around with them, are important, DeSanto says, because the store carries a small fraction, 4.5%, of the 150,000 items Staples.com offered as of August. The store lacks the space to carry desks and other large products featured in traditional Staples stores, so store shoppers looking to buy those items have to consult with an employee or use a kiosk. And despite the smaller size, the retailer aims for the smaller-format stores to retain 95% of their sales. DeSanto says results have been “promising.”

For much more about how Staples is adapting to the needs of the modern shoppers, including through the chain’s e-commerce innovation work, read the September issue of Internet Retailer magazine.